Telegraph distorts the truth on energy bills

The Daily Telegraph has joined the ranks of the Daily Mail and Daily Express in exaggerating the costs of environmental regulations, reports Will Straw.

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Will Straw is Associate Director for Globalisation and Climate Change at the Institute for Public Policy Research (IPPR)

The Daily Telegraph has joined the ranks of the Daily Mail and Daily Express in exaggerating the costs of environmental regulations.

An article in today’s paper features the headline ‘£200 a year for green power’. A longer version of the article appeared online yesterday.

It claimed:

“Government estimates suggest the new subsidies will put an extra £205 a year on the average household electricity bill over the next 15 years. It has predicted domestic electricity figures will rise from £477 per year to £682 per year by 2026.”

DECC’s Electricity Market Review Impact Assessment (pdf) includes the following table (Figure 18) showing estimates for final average household electricity bills using a central assumption for fossil fuel prices.

Although bills are expected to increase from 2011-15 to 2026-30 this is largely due to increases in wholesale costs, network costs, supplier costs and margins, and VAT.

The carbon price cost (light blue) and EMR support costs (dark green) are expected to rise but by more modest amounts; by contrast, other energy and climate change policy costs (light green) are expected to fall dramatically.

The Telegraph are more accurate in citing figures from the Committee on Climate Change which show £110 of the expected increase in electricity bills from £1,060 in 2010 to £1,250 in 2020 will be due to environmental policies. But this is assuming there are no further measures to improve energy efficiency which could reduce average bills to £1,050 by 2020 – effectively reversing the increases in both wholesale gas costs and environmental policies.

Meanwhile, there is a considerable downside risk that high gas prices due to increased global demand from countries like China could push up wholesale costs. This would see costs soaring to £1,425 with nothing to do with environmental policies.

This is not to suggest the Energy Bill is flawless. It is not. IPPR’s own research (pdf) has shown the Carbon Price Floor will increase the cost of carbon without a commensurate reduction in carbon emissions. The Energy and Climate Change Select Committee has found (pdf) the ‘contracts for difference’ mechanism is actually unsuitable for supporting renewable generation.

Challenging the government to achieve its legal obligations to reduce carbon emissions at the lowest possible cost is a worthy aim. But the distortion in the Telegraph’s story does little to help us understand how to make this happen.

UPDATE 2200hrs 10/05/12:

The excellent Carbon Brief blog has dissected the Telegraph’s erroneous claims in even more detail.

“The Telegraph appear to have interpreted figures showing how bills will change if new policies are not introduced as showing how bills will change if they are introduced. In other words, the figures show the opposite of what the article says they do.”

SO when the renewable obligation generators (that’s what they are) are built and costs spiral 7-8 times above real output (as they have for existing builds), and bills rise by £100+ a year to support this, you’ll ignore the people being frozen out.

Energy costs are set to keep rising very sharply ahead of inflation in the real world.

Nuclear power – it makes sense. But it’s not as good for Cameron’s friends, so it’s being sidelined. They’ve realised how much RO generators can make them…

(Energy “efficiency”? Ah yes, getting people to disconnect. Since landlords don’t give a flying ***** about it, they don’t pay the energy bill!)

Funnily enough, PV cells have fallen in price by 50% in the last few months, like with all new technologies it does takebut a long time before it becomes economically viable.

A classic example would be the gas industry as in how many billions / trillions of pounds have been spent on that industry and its percentage feedback now? I think renewables are well down on the amount of investment overall.

I do agree we need a mixture of technologies including nuclear, as to put all our eggs ine one basket would be suicidal, the reason it is costing us so much now is that very little real term investment has been made into the energy industry over the last 30 years.

We should have used the money generated from North Sea Gas ti reinvest in the enxt generation of energy such as Nucelar etc at the time, but the goverment in question used it to provide tax cuts, all in all politically stupid.

Anonymous

Any install which can stand with only routine subsidies is fine, but PV cells have several (5-6, I estimate) more years development before they can routinely be used in this country without major subsidies and prices are likely to spike because of rare earth shortages.

The major problem is wind power, actually, there are major installs going up which will never be commercially viable.

For myself, I’d like to mandate solar water heating (if PV panels are not present) on new housing, myself, since those /are/ generally economically viable.

For that matter, I’d give breaks to stamp duty based on the eco-rating of the house. That’s the kind of thing which will encourage landlords to upgrade the housing stock!

(But not nearly as much as rent caps, which can be lowered for non-compliant properties…)